Vince Cable has revealed plans for Royal Mail's privatisation. Here is what
you need to know.

The Government claims that Royal Mail needs a massive injection of capital to adapt to the changing world of postal delivery. As letters have been replaced by emails and texts, the organisation’s core business has suffered. Meanwhile, the boom in online shopping has led to a big increase in parcel delivery and the Government says that Royal Mail needs cash to invest in new technology in order to process more parcels and to compete with private delivery firms.

When will it be sold and for how much?

Vince Cable said that the Government will sell "a majority stake" in Royal Mail by the end of the financial year, without giving any further detail. Expectations are for around 60pc of the company to be listed toward the end of the year, barring any hold-ups. The business has been valued at between £2.5bn and £3bn, and staff will be handed 10pc of the group.

The Labour government considered selling a minority privatisation in 2009, when it returned to profit, although the plan faced vocal opposition from backbenchers and Business Secretary Lord Mandelson shelved the plans, citing economic conditions. When the Coalition came into power in 2010, the plan was revived, and 2011’s Postal Services Act paved the way for the Government to sell up to 90pc of Royal Mail, with workers promised 10pc.

What does it mean for workers?

Around 150,000 Posties are expected to be handed at least 10pc of Royal Mail’s shares for free. At a £3bn valuation this works out at, on average, £2,000 per worker, although staff will also have first priority in a retail sale to members of the public should they want to buy more. Despite this, the Communication Workers Union (CWU), which represents the vast majority of postal workers, vehemently opposes the float, claiming it will threaten working conditions, pensions and pay.

What does it mean for investors?

Individuals will be able to buy shares in the company on the internet and through a stockbroker, although the offer to the public will not be on the same scale as the “Tell Sid” campaign that accompanied the privatisation of British Gas in the 1980s and institutional investors are set to buy up much of the company. Royal Mail appears to be a much more attractive investment than a few years ago, with operating profits last year reaching £403m, up from £152m the previous year.

Will a sale affect the postal service?

The Government says not. 2011’s Postal Services Act set out a Universal Service Obligation that ensures that Royal Mail will continue to run a six-day postal service at an affordable price, as well as hitting other targets such as what proportion of first class packages should arrive the next day. The business is regulated by Ofcom which has also sought to protect post boxes in rural areas. The Post Office, which was separated from Royal Mail last year, will also not be affected. The two organisations have a 10-year agreement to continue to work together.

What still needs to be sorted out?

The privatisation still faces vocal opposition from the CWU, which has rejected a pay deal that would see wages rise 8.6pc over the next three years. The union has said that strike action is inevitable if the privatisation goes ahead. Although the route to a flotation is well underway, with the Government appointing a host of banks including Goldman Sachs and UBS, business minister Michael Fallon has spoken of a “Plan B” private equity sale if the listing falls through.